Market & Policy · Insurance Term
Third-Party Coverage (Third-Party Liability)
Definition
Third-party coverage pays for harm you cause to other people, such as injuries or damage to their property, and for your legal defense. It is the opposite of first-party coverage, which pays for your own losses, like damage to your own building.
In Plain English
The first party is you, the insured. The insurer is the second party. A third party is someone outside the contract, such as a visitor, tenant, customer or neighbor, who claims you are responsible for their loss.
General liability is the classic third-party policy. It responds to bodily injury and property damage claims, like a customer slipping in your parking lot. Your property policy is first-party coverage and pays to repair your own building.
Third-party policies usually include defense, which can be the largest cost in a lawsuit. They pay only when you are legally liable, or when a suit is brought alleging you are.
Not sure how your policy handles this? Have us review it, or get a quote.
Example
Hypothetical: a storm blows a sign off your building onto a parked car. Repairs to your sign fall under your property (first-party) coverage. The car owner's claim against you falls under your liability (third-party) coverage.
What to Watch For
- Make sure you have both first-party (property) and third-party (liability) coverage.
- Check whether defense costs reduce your liability limits or are paid in addition.
- Report any incident that might lead to a claim, even if no one has sued yet.
Last updated October 14, 2026 · Primesure editorial team · How We Write